On 27 November 2019, the Parliament’s Committee of the Whole House has proposed major changes to the Income Tax Bill, which was forwarded to the committee’s review on the 19 November 2019’s parliament session.
One of the significant changes now made to the Bill includes revising the marginal tax brackets applicable to individuals. The amended tax brackets are as follows:
|Monthly Income (MVR)||Rate|
|200,000 and above||15%|
This is a major change from the government’s originally proposed brackets of individuals with a starting rate band of MVR 40,000-MVR 60,000 at 8%. The tax rates for companies, partnerships and persons other than individuals remain the same as proposed by the government- that is 25% for banks and 15% of taxable income in excess of MVR 500,000 for persons other than banks and individuals.
Some of the other notable changes proposed by the Committee include:
- Introducing the concept of “temporary residency” under which temporary tax residents (defined as a tax resident foreigner holding a visa to stay in the Maldives, and not married to a Maldivian) will be taxed only on Maldives sourced income. Before this amendment, even temporary residents were to declare income tax on their worldwide income.
- Subjecting dividend income earned by residents from resident companies to tax if it exceeds MVR1 million in a tax year. Prior to this change, dividends received from resident companies by residents were entirely exempt from income tax.
- Requiring the MIRA to consider the loan repayment period when determining the capital allowance rate for buildings constructed under housing loans. One condition attached to this is that such loans should be from a Bank or non-banking financial institution licensed under the Banking Act of the Maldives.
- Making the commencement date of income tax of individuals to be effective from 90 days from the ratification of the Act. The income tax of persons other than individuals will commence as proposed initially, which is from 1 January 2020.
The committee’s report on the Bill will be submitted to the Parliament Members again, after which the Bill will proceed to the Parliament’s floor again to be voted.
(Photo credits: raajje.mv)